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Indian Stamp Act is a vast area which requires in-depth study as this law is applicable in all the transactions irrespective of the amount involved irrespective of the fact that it is exchange, sale or buy etc., and the parties concerned has to pay the stamp duty to the government. Be it an individual or a company, on every transaction, stamp duty has to be paid. As for instance, a company based in Okhla, Delhi gives a loan to a person based in Hauz Khas,Delhi, and thereafter the person based in Hauz Khas, Delhi executes a promissory note in favour of the company based in Okhla, but the stamp duty as fixed by the law is not paid, and the person based in Hauz Khas Delhi refuses to pay the loan amount to the Company based in Okhla, Delhi and if a suit for recovery of money is filed in the Court by the company based in Okhla, Delhi against the person who took the loan amount based in Hauz Khas, Delhi, then that promissory note may not be read as an evidence in favour of the company based in Okhla Delhi against the person based in Hauz Khas Delhi. Moreover, if the duty is not paid then the penalty may be imposed by the concerned authorities / Government. If the penalty is not as imposed is not paid, then the Collector concerned can also punish the person for non-payment of the stamp duty and the penalty. The word penalty means fine and forfeiture and the collector has got the power in the perspective of revenue at the district level and has got the power to either punish, imposition of fine and forfeiture.
Introduction with Effect of Not Duly Stamping Instruments
First of all let us understand the definition of few words
“instrument” includes every document by which any right or liability is, or purports to be, created, transferred, limited, extended, extinguished or recorded;
Duly stamped –
“duly stamped”, as applied to an instrument, means that the instrument bears an adhesive or impressed stamp of not less than the proper amount, and that such stamp has been affixed or used in accordance with the law for the time being in force in India.
(a) means, within the limits of the towns of Calcutta, Madras and Bombay, the Collector of Calcutta, Madras and Bombay, respectively, and, without those limits, the Collector of a district; and
(b) includes a Deputy Commissioner and any officer whom the State Government may, by notification in the Official Gazette, appoint in this behalf ;
“penalty” means ‘fine and forfeiture’
Instrument not duly stamped –
From the above definition ‘instrument’ means ‘any right or liability is transferred’ and ‘duly stamped’ means ‘instrument bears an adhesive stamp of proper amount as per fixed by law’ so ‘Instrument not duly stamped’ means ‘instrument bear a stamp which of the lower amount as per fix by law’
We can now conclude from the above definition that instrument means any right or liability is transferred while duly stamped means instrument bears stamp of appropriate amount as fixed by the law, therefore instrument duly stamped means Instrument bearing stamp of the lower amount as fixed by the law.
Penalties on Instrument not duly stamped:-
When a appropriate / Proper stamp duties are not paid on the concerned instrument, then the Collector has the power to impose Penalty. The penalty as imposed by the Collector on the Insuuficient Stamp duty may be a fine of Rs.500/- or the Collector may impose a fine to ten times the insufficient stamp duty.
As for instance, when a company based in Okhla, Delhi, gives on rent his commercial premises to a company based in Connuaught Place, Delhi but the lease deed signed between the companies based in Okhla and Connaught Place are not sufficiently stamped and thereafter the company based in coonaught place stops giving the rent to the company based in Okhla, Delhi, and thereafter a suit is brought in a court by the company based in Okhla, Delhi against the company based in Connaught Place, Delhi, then the court may either refuse to even issue notice against the compay based in Connaught Place, Delhi or the lease-deed may not be read as an evidence in favour of the company based in Okhla Delhi and against the company based in Connuaght Place, Delhi.
Instruments may be impounded after its Registration:- When either by mistake or otherwise, when any instrument is not stamped properly / duly and is registered under the Registration Act, 1908, the Registering officer may call for the instrument in original and after giving the parties an opportunity of being heard and after the recording of the reasons in writing and furnishing a copy to the party, may impound the instrument. But, on failure to produce / bring the said original instrument by the concerned party, a true copy of the said instrument is taken from the record and shall be treated / deemed to be the original of said instrument.
Sub-Section(1) – Person- Liablity of Firm or Corporation for Servants’ Act – The term ‘person’ does include a Partnership firm and a Corporation. When a servant of a trading partnership firm gives an unstamped receipt and thereafter refuses to give a stamped receipt, then all the partners of the firm can be held to be criminally liable.
It is to be remembered that the word signing otherwise than as witness means that a witness to an Instrument does not draw, make ot execute it.
The word “Accepting” does not mean receiving the instrument but it is rather executing as an Acceptor. It is to be remembered that to receive a promissory note which is not duly stamped and thereafter to put it in a suit does not attract an offence / punishment. If an instrument is not duly / properly stamoped then the person who is subject to penalty is the person who has made that instrument and it is not that person in whose favour that particular instrument is made but it incurs the risk being debarred from producing it as an evidence but the person in whose favour it is made does not make him liable for penalty.In other sense, it is to be understood that the receiver of the instrument is not liable as that of an abettor. Receiving the payment of a promissory note means receiving the money which is due and under the promissory note and not receiving the promissory note itself.
Under Section 25 of the General Clauses Act, the fines which are recoverable are laid down under the the Criminal Procedure Code and if payment of fine is not made then Simple Imprisonment can also be made. The word penalty includes both fine and forfeiture.
Therefore, in general sense, it has to be understood that the Document / Instrument should be duly stamped and non payment of stamp duty may attract penalty, punishment and moreover, the most important fact is that the particular document / Instrument may not be read as an Evidence in the Court of Law.